Scotland raises India tariff issue over bulk Scotch whisky exports

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Scotland-India whisky tariff issue

Highlights

Scottish government raised concerns in October over Indian tariff treatment of bulk Scotch whisky under the new UK-India free trade agreement.
India agreed to immediately reduce tariffs on some Scotch imports to 75% from 150%, declining to 40% over 10 years, but bulk concentrates were excluded.
Indian officials are probing whether Pernod Ricard and Diageo misclassified bulk Scotch for lower tariffs, creating a dispute that threatens Scotland's whisky export gains.

Tariff dispute emerges after trade deal rollout

As reported by Reuters, the Scottish government said on Friday that Swinney raised the treatment of bulk Scotch whisky exports with Indian ministers during his October 20-27 visit to India, after concerns emerged over whether some shipments qualify for lower tariffs under the UK-India free trade agreement.

Whisky duties were one of the main sticking points in the long negotiations over the pact. India ultimately agreed to cut import taxes on certain Scotch imports to 75% from 150% immediately, with the rate due to fall to 40% over 10 years under the agreement, which took effect in July.

Indian investigators have privately told companies including Pernod Ricard and Diageo that the reduced tariff does not apply to bulk Scotch concentrates, marking the first significant dispute since the trade deal comes into force. In an email response, a Scottish government spokesperson said discussions during the trip covered implementation of the agreement, including the treatment of bulk Scotch whisky.

The spokesperson said the Scottish government will continue to work constructively to ensure Scottish exporters can make the most of the agreement.

Implications for Scottish exporters and UK trade policy

Indian tax officials are investigating whether Pernod Ricard and Diageo wrongly classified some bulk Scotch whisky imports, which allowed them to pay lower tariffs. A liquor industry group argues that India's position conflicts with the provisions of the India-UK trade deal.

Responsibility for trade policy rests with the British government rather than Scotland's devolved administration, but Swinney still plays a role in promoting Scottish business interests abroad. The British government says it is working with the Indian government in a bid to resolve the issue, a step closely watched by Scotland's whisky sector as it looks to secure the promised benefits of the agreement.

India’s September merchandise trade deficit widened to $30.21 billion as imports outpaced exports, with the higher import bill linked to elevated crude prices and geopolitical disruptions affecting energy flows. In our earlier article, we noted that India is simultaneously pushing export-market diversification through multiple trade agreements, including the pact with Britain that is already in force—setting the broader backdrop for how tariff rules and implementation details can matter for cross-border shipments.

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